Glossary

Knowledge

Trading Glossary

A-book broker – Broker routes client orders to external liquidity providers.
Absolute return – The total return of an investment, unadjusted for risk.
Accumulation – Period when investors buy assets, pushing the price higher.
ADR (American Depository Receipt) – Security representing shares in a foreign company.
ADX (Average Directional Index) – Indicator measuring trend strength in the market.
Algorithmic trading – Automated trading using pre-set algorithms.
All or None (AON) – Order must be fully filled or not at all.
Alpha – Measures a stock’s performance relative to the market.
Amortization – Gradual repayment of a loan or asset over time.
Analyst – Financial expert who studies stocks or markets.
Arbitrage – Simultaneous buying and selling to profit from price differences.
Ask price – The lowest price a seller is willing to accept.
Asset allocation – Distributing investments across different asset classes.
Asset-backed security (ABS) – Security backed by loans or receivables.
At the money – Option’s strike price is the same as the current price.
Averaging down – Buying more of a stock as the price decreases.
Back office – Support operations in a brokerage or financial institution.
Backtest – Testing a trading strategy using historical data.
Balance of trade – Difference between a country’s imports and exports.
Bear market – A prolonged period of declining asset prices.
Bear trap – False signal showing a falling market, which reverses upwards.
Bid price – The highest price a buyer is willing to pay.
Blue-chip stock – Shares of large, reputable, financially stable companies.
Bollinger Bands – A volatility indicator showing high and low price levels.
Bond – Debt security issued by governments or corporations.
Break-even – The point where gains equal losses, no profit or loss.
Breakout – When the price moves out of a defined range.
Broker – A person or firm that arranges transactions between buyers and sellers.
Bull market – A prolonged period of rising asset prices.
Bull trap – False signal showing a rising market, which reverses downwards.
Buy limit order – Order to buy at a specific price or lower.
Buy stop order – Order to buy once the price reaches a certain level.
Call option – Contract giving the right to buy an asset at a set price.
Candlestick chart – A chart showing price movement, with a body and wicks.
Carry trade – Borrowing in a low-interest currency to invest in a higher-interest one.
CFD (Contract for Difference) – Derivative contract to exchange the difference in asset prices.
Central bank – National bank that oversees monetary policy and currency.
Chart patterns – Recognizable formations in price charts used to predict price movements.
Churning – Excessive trading by a broker to generate commissions.
Clearing – The process of settling a trade between two parties.
Close position – Exiting an open trade or investment.
Commission – The fee charged by a broker for executing trades.
Commodity – Raw materials or primary agricultural products like oil, gold, or wheat.
Correlation – Measure of how two securities move in relation to each other.
Counterparty – The other party in a transaction.
Cross currency pair – Currency pair that does not include the US dollar.
Currency pair – The quotation of two currencies against each other.
Current account – A country’s trade balance plus net income and direct payments.
Daily trading limit – Maximum price change allowed for a trading day.
Day trading – Buying and selling financial instruments within the same trading day.
Debt-to-equity ratio – Ratio of company debt to shareholder equity.
Deflation – A decrease in the general price level of goods and services.
Derivatives – Financial contracts deriving value from underlying assets.
Devaluation – A decrease in a currency’s value relative to other currencies.
Dividend – Portion of a company’s earnings paid to shareholders.
Diversification – Spreading investments across different assets to reduce risk.
Double bottom – A bullish reversal pattern indicating price support at a certain level.
Double top – A bearish reversal pattern indicating resistance at a certain price level.
Drawdown – A reduction in equity from a peak to a trough in trading.
Earnings per share (EPS) – Profit divided by the number of outstanding shares.
ECB (European Central Bank) – The central bank managing the euro and monetary policy in the EU.
Economic indicator – Statistical measure of economic activity.
Equity – The ownership value in an asset after liabilities are deducted.
Equity swap – A swap where parties exchange the returns of an equity asset.
Exchange rate – The value of one currency relative to another.
Ex-dividend date – The date after which a stock buyer does not receive the declared dividend.
Execution – Completing a buy or sell order for a security.
Exotic currency – A less commonly traded currency pair.
Exposure – The amount of risk involved in a financial transaction.
Fair value – The estimated worth of a financial instrument.
Fibonacci retracement – A tool used to predict potential price reversal levels.
Financial instrument – A tradable asset like stocks, bonds, or derivatives.
Flat (Square) – Holding no position in a particular asset or currency pair.
Floating exchange rate – Currency price determined by supply and demand.
Forex (FX) – The global market for trading currencies.
Forward contract – Agreement to buy or sell an asset at a future date at a fixed price.
Fundamental analysis – Analyzing securities based on economic and financial factors.
Futures contract – A contract to buy or sell a commodity or asset at a future date.
Gap – A break between prices on a chart when no trading occurs.
GDP (Gross Domestic Product) – The total market value of all goods and services produced in a country.
Gearing – The use of borrowed capital (leverage) to increase potential returns.
Gilt – UK government bond.
Good till canceled (GTC) – An order that remains active until it is executed or canceled.
Greenback – A nickname for the US dollar.
Gross margin – Sales revenue minus cost of goods sold.
Growth stock – A stock expected to grow at an above-average rate compared to others.
Hedge – A strategy used to offset potential losses from another investment.
Hedge fund – A fund that uses complex strategies to maximize returns.
Holding period – The time an investment is held before being sold.
Horizontal integration – A company’s expansion by acquiring competitors in the same industry.
Index – A measurement of the performance of a group of stocks.
Index fund – A mutual fund that aims to replicate the performance of a specific index.
Inflation – A general increase in prices and fall in the purchasing value of money.
Initial margin – The minimum amount required to open a leveraged position.
Insider trading – Illegal trading based on non-public information.
Interest rate – The amount charged by lenders to borrowers, typically expressed as a percentage.
IPO (Initial Public Offering) – The first time a company offers its shares to the public.
Keynesian economics – Economic theory that advocates for government intervention to stabilize the economy.
Lagging indicator – An indicator that follows an event, showing confirmation of a trend.
Leverage – Using borrowed capital to increase the potential return of an investment.
Limit order – An order to buy or sell at a specified price or better.
Liquidity – The ease with which an asset can be bought or sold without affecting its price.
Lock-in period – Time during which investors cannot sell their investment.
Long position – Buying a security with the expectation that it will rise in value.
Lot – A standardized quantity of a financial instrument.
MACD (Moving Average Convergence Divergence) – A trend-following momentum indicator.
Margin call – A broker’s demand for additional funds to cover potential losses.
Market capitalization – The total market value of a company’s outstanding shares.
Market maker – A firm that provides liquidity by buying and selling financial instruments.
Market order – An order to buy or sell immediately at the current market price.
Market sentiment – The overall attitude of investors toward a particular market or asset.
Moving average – An average of a security’s price over a set period of time.
Multilateral trading facility (MTF) – A trading system that facilitates the exchange of financial instruments.
Net asset value (NAV) – The value of a fund’s assets minus its liabilities.
Net exposure – The difference between a trader’s long and short positions.
Net profit – The amount left after all expenses have been deducted from total revenue.
Non-farm payrolls (NFP) – A key economic indicator in the U.S. measuring employment growth.
Offer price – The price at which a seller is willing to sell an asset.
Open position – A trade that has not yet been closed or settled.
Option – A contract giving the right, but not the obligation, to buy or sell an asset.
Overbought – When an asset’s price has risen too much and may be due for a correction.
Oversold – When an asset’s price has fallen too much and may be due for a rebound.
Par value – The nominal value of a bond or stock.
Pip – The smallest price movement in forex, usually 0.0001 for most currency pairs.
Portfolio – A collection of financial investments such as stocks, bonds, and other assets.
Position trading – A long-term trading strategy where positions are held for months or years.
Price action – The movement of a security’s price over time.
Price-to-earnings ratio (P/E ratio) – A ratio used to value a company by dividing its market price per share by earnings per share.
Private equity – Investment capital from private sources in exchange for ownership stakes in companies.
Profit margin – The percentage of revenue that is profit after expenses.
Quantitative easing (QE) – A monetary policy where central banks buy securities to increase money supply.
Quote currency – The second currency in a currency pair, used to value the first currency.
Range – The difference between the highest and lowest prices in a given period.
Rate of return – The gain or loss of an investment over a specified period.
Recession – A significant decline in economic activity over a prolonged period.
Resistance level – A price level where an asset encounters selling pressure.
Retail investor – Individual investors who buy and sell securities for personal accounts.
Retracement – A temporary reversal in the direction of a stock’s price.
Return on investment (ROI) – The gain or loss generated from an investment relative to its cost.
Risk management – The identification and mitigation of potential financial risks.
Risk-to-reward ratio – A metric comparing potential profit to potential loss in a trade.
Rollover – Extending the settlement date of a position in forex trading.
Round lot – A standard trading unit, usually 100 shares in stock trading.
S&P 500 – A stock market index of 500 leading companies in the U.S.
Scalping – A trading strategy focused on making small, quick profits from price fluctuations.
Sector – A segment of the economy representing a specific type of business activity.
Securities – Tradable financial assets such as stocks, bonds, and options.
Security token – A blockchain-based digital asset representing ownership in real-world assets.
Sell limit order – An order to sell an asset at or above a specific price.
Sell stop order – An order to sell once the price reaches a predetermined level.
Settlement – The completion of a transaction, where the buyer receives the asset and the seller receives payment.
Short position – Selling an asset with the expectation that its price will fall.
Simple moving average (SMA) – An average of an asset’s price over a specific time period.
Slippage – The difference between the expected price of a trade and the price at which it is executed.
Smart order routing (SOR) – Automated systems that seek the best possible price across multiple venues.
Sovereign bond – A bond issued by a national government.
Speculation – The practice of trading high-risk financial instruments for potential quick profits.
Spot price – The current market price for immediate delivery of an asset.
Spread – The difference between the bid and ask price of a financial instrument.
Stagflation – A combination of stagnant economic growth and high inflation.
Stock split – The division of a company’s shares into more shares to boost liquidity.
Stop loss order – An order to automatically sell an asset once it reaches a certain price to limit losses.
Stochastic oscillator – A momentum indicator comparing a closing price to a range of prices over a period.
Swap – An agreement to exchange cash flows or assets between two parties.
Swing trading – A trading strategy that involves holding positions for days or weeks.
Systematic risk – The risk inherent to the entire market or market segment.
Take profit order – An order to automatically close a position when a specific price is reached to lock in profits.
Technical analysis – Analysis of price and volume data to forecast future price movements.
Thin market – A market with low trading volume and liquidity.
Tick size – The smallest possible price movement of a trading instrument.
Time decay – The reduction in the value of an options contract over time.
Time value – The portion of an option’s premium attributable to the time remaining until expiration.
Total return – The full return of an investment, including capital gains and dividends.
Trade balance – The difference between a country’s exports and imports.
Trailing stop – A stop order that adjusts automatically as the asset’s price moves in favor of the position.
Treasury bond – A long-term debt security issued by a government.
Triple top – A bearish reversal chart pattern formed by three peaks at the same price level.
Turnover – The total value of shares traded in a specific period.
Underlying asset – The security on which a derivative contract is based.
Undervalued – An asset trading below its perceived intrinsic value.
Unrealized gain/loss – The potential profit or loss on an open position that has not yet been closed.
Uptick – A transaction that occurs at a higher price than the previous trade.
U.S. dollar index (DXY) – A measure of the value of the U.S. dollar relative to a basket of foreign currencies.
Value at risk (VaR) – A risk management tool estimating the maximum loss over a specified period.
Value investing – A strategy focused on identifying undervalued stocks with strong fundamentals.
Variable costs – Expenses that vary with the level of output or production.
VIX (Volatility Index) – A measure of market volatility based on options prices.
Volume – The total number of shares or contracts traded in a security during a specific period.
VWAP (Volume-Weighted Average Price) – A trading benchmark calculated by dividing the total value of trades by total volume.
Warrant – A financial instrument giving the holder the right to buy or sell a security at a specific price.
Wash sale – A sale of a security at a loss, followed by a repurchase of the same security shortly after.
Weighted average cost of capital (WACC) – A company’s average cost of capital from all sources.
Whipsaw – A sharp reversal in the price of a security, typically resulting in losses for traders.
Wholesale price index (WPI) – An index measuring the price changes of goods at the wholesale level.
Wildcatting – A high-risk, speculative investment strategy in the oil and gas industry.
Yield – The income return on an investment, typically expressed as a percentage.
Yield curve – A graph that plots the yields of similar quality bonds against their maturities.
Zero-sum game – A situation where one participant’s gain is exactly offset by another’s loss.
Zombie company – A company generating just enough revenue to meet interest payments but unable to reduce its debt.
Zone of support/resistance – Areas on a chart where an asset finds consistent buying (support) or selling (resistance) pressure.
Accumulation/Distribution Indicator – A volume-based indicator measuring supply and demand of an asset.
Active trading – Frequent buying and selling to capitalize on short-term market movements.
Agency broker – A broker who acts on behalf of clients, without holding inventory.
Allotment – Distribution of shares to investors during an IPO.
Analyst rating – Evaluation of a stock’s potential by financial analysts, typically labeled as buy, hold, or sell.
Annual report – A company’s yearly financial statements and performance review.
Appreciation – An increase in the value of an asset over time.
Asset class – Grouping of investments with similar characteristics, such as stocks or bonds.
Ask-Bid Spread – The difference between the ask (sell) price and the bid (buy) price.
Automatic execution – An automated system that executes trades at preset conditions.
Average true range (ATR) – Indicator measuring market volatility based on recent price movements.
Backspread – An option strategy using a greater number of long options than short options.
Balance sheet – A financial statement showing a company’s assets, liabilities, and equity.
Bar chart – A type of chart that shows price movements with vertical bars.
Base currency – The first currency listed in a currency pair.
Basket trade – A group of several securities traded together as a single transaction.
Bearish divergence – A scenario where price increases, but an indicator suggests weakening momentum.
Beneficiary – The person or entity entitled to receive benefits from a financial contract.
Beta – A measure of a stock’s volatility relative to the overall market.
Binary option – A financial option where the payoff is either a fixed amount or nothing.
Black swan event – An unpredictable event with severe consequences.
Block trade – A large transaction of securities, typically executed privately to minimize market impact.
Blow-off top – A sharp price rise followed by a rapid decline, often signaling the end of a market trend.
Book value – The value of a company’s assets minus its liabilities.
Bottom fishing – Strategy of purchasing beaten-down assets in anticipation of a recovery.
Bracket order – An order placed with simultaneous stop-loss and take-profit limits.
Break-even point – The price at which gains equal losses, resulting in no profit or loss.
Buyback – When a company purchases its own shares to reduce the number of shares outstanding.
Cable – The GBP/USD currency pair.
Calendar spread – An options strategy involving two contracts with different expiration dates.
Capital appreciation – An increase in the value of an asset or investment.
Capital gain – The profit realized from selling an asset for more than its purchase price.
Capital preservation – An investment strategy aimed at avoiding losses rather than seeking high returns.
Capital structure – The mix of debt and equity a company uses to finance its operations.
Cash account – A brokerage account in which the investor must pay the full amount for securities purchased.
Cash flow – The net amount of cash and cash-equivalents flowing in and out of a business.
CBOE Volatility Index (VIX) – A measure of expected volatility in the stock market.
Circuit breaker – A mechanism that temporarily halts trading in response to extreme price moves.
Clearing house – An intermediary that facilitates the settlement of trades between buyers and sellers.
Cloud computing stocks – Shares of companies involved in providing cloud-based services.
Commodity Channel Index (CCI) – A technical indicator used to identify cyclical trends in a market.
Compound interest – Interest calculated on both the initial principal and the accumulated interest from previous periods.
Consolidation – A period of range-bound trading following a price move.
Convertible bond – A bond that can be converted into a set number of the issuer’s shares.
Correlation coefficient – A statistical measure of how two securities move in relation to each other.
Cost basis – The original value of an asset for tax purposes, adjusted for stock splits and dividends.
Counter-cyclical stock – A stock that tends to perform well during economic downturns.
Covered call – An options strategy where the investor sells call options while owning the underlying asset.
Credit default swap (CDS) – A financial derivative allowing the buyer to swap credit risk with another party.
Credit risk – The risk that a borrower will default on their debt obligations.
Crowdfunding – Raising small amounts of capital from a large number of individuals to finance a new venture.
Cumulative dividend – A dividend that must be paid before common stock dividends if omitted in previous periods.
Cup and handle pattern – A bullish chart pattern signaling a continuation of an uptrend.
Currency basket – A collection of currencies used to manage foreign exchange risk.
Currency futures – Futures contracts to exchange one currency for another at a future date.
Currency peg – A policy where a country fixes its currency’s value to another currency or basket of currencies.
Cyclical stock – A stock whose price is affected by macroeconomic or systematic changes in the economy.
Dark pool – A private financial exchange for trading securities not openly available to the public.
Dead cat bounce – A temporary recovery in prices after a significant decline.
Debt instrument – A financial asset representing a loan made by an investor to a borrower.
Defensive stock – A stock that provides consistent dividends and stable earnings regardless of market conditions.
Delta – Measures how much an option’s price will change with a $1 move in the underlying asset.
Derivative – A financial contract whose value is based on the performance of an underlying asset.
Discount rate – The interest rate used to discount future cash flows to their present value.
Discretionary account – An account where the broker has authority to make trades on the client’s behalf.
Distribution – The sale of large amounts of stock by institutional investors.
Dividend yield – The annual dividend payment divided by the stock’s current price.
Dollar-cost averaging – A strategy of investing a fixed amount at regular intervals, regardless of price.
Donchian Channel – An indicator that plots the highest high and lowest low over a specific period.
Downgrade – A reduction in the rating of a security by an analyst.
Drawdown period – The time between the peak of an investment and its subsequent lowest point.
Duration – A measure of the sensitivity of a bond’s price to changes in interest rates.
Earnings before interest and taxes (EBIT) – A company’s profit before deducting interest and tax expenses.
Earnings surprise – When a company’s reported earnings differ from analysts’ expectations.
Efficient market hypothesis (EMH) – The theory that asset prices reflect all available information at any given time.
Emerging markets – Markets in countries with developing economies, often characterized by higher growth potential.
Enterprise value (EV) – A measure of a company’s total value, including market capitalization and debt.
Entry point – The price at which an investor opens a position.
Equity risk premium – The excess return investing in stocks provides over risk-free investments.
Exchange-traded fund (ETF) – A security that tracks an index or basket of assets and trades on an exchange.
Exit point – The price at which an investor closes a position.
Exponential moving average (EMA) – A weighted average of a security’s price that gives more weight to recent data.
Falling wedge – A bullish chart pattern signaling a potential reversal from a downtrend.
Federal Reserve (Fed) – The central bank of the United States.
Fiat currency – Money that has no intrinsic value and is not backed by a physical commodity like gold.
Fill-or-kill (FOK) – An order that must be executed immediately in full or canceled.
Filter rule – A trading strategy that uses technical indicators to determine entry and exit points.
First in, first out (FIFO) – An accounting method where the oldest inventory is sold first.
Fixed income – Investments, such as bonds, that provide regular, fixed interest payments.
Flag pattern – A chart pattern indicating a brief pause in a prevailing trend before it resumes.
Flash crash – A very rapid, deep, and volatile market drop, often followed by a sharp recovery.
Float – The number of shares available for public trading.
Foreign exchange reserves – A country’s holdings of foreign currency used to back liabilities.
Forward rate – The future exchange rate implied by the current spot rate and interest rates.
Fractional shares – Less than a full share of a company, allowing investors to buy small portions of expensive stocks.
Free cash flow – Cash a company generates after accounting for capital expenditures.
Front running – The unethical practice of placing orders ahead of a known large order to profit from its impact.
Fund manager – A person responsible for implementing a fund’s investment strategy and managing its portfolio.
Futures market – A marketplace where futures contracts are bought and sold.
Gamma – Measures the rate of change in an option’s delta with respect to changes in the underlying price.
Gap down – When the opening price of a security is lower than the previous day’s closing price.
Gap up – When the opening price of a security is higher than the previous day’s closing price.
Gapping – When a stock or asset opens significantly higher or lower than its previous close.
Golden cross – A bullish signal where a short-term moving average crosses above a long-term moving average.
Good-till-date (GTD) – An order that remains active until a specified expiration date unless executed or canceled.
Greenfield investment – A company’s investment in a foreign country by establishing new operations.
Gross margin – The difference between revenue and cost of goods sold, expressed as a percentage.
Growth fund – A mutual fund or ETF focused on investing in growth stocks.
Guaranteed stop – A stop-loss order that guarantees a specific exit price, even if the market gaps.
Haircut – A reduction applied to the value of an asset when determining its eligibility as collateral.
Hammer – A candlestick pattern signaling potential bullish reversal after a downtrend.
Hanging man – A bearish candlestick pattern indicating a potential downward reversal.
Hard currency – A currency widely accepted around the world, typically from stable economies.
Head and shoulders – A chart pattern used to predict reversals, with a peak (head) between two smaller peaks (shoulders).
Hedge ratio – The ratio of a hedge position to the underlying asset’s exposure.
High-frequency trading (HFT) – A trading strategy using powerful computers to execute thousands of orders in fractions of a second.
High-water mark – The highest level that a fund has reached, used in performance-based compensation.
Historical volatility – A measure of how much the price of a security has fluctuated over a specific period.
Holding company – A parent company that owns enough voting stock in another company to control its policies.
Hot money – Capital that moves quickly between markets in search of the highest short-term returns.
Hurdle rate – The minimum rate of return required before an investment can start generating profits.
Illiquid asset – An asset that cannot be easily sold or exchanged for cash without significant loss in value.
Implied volatility – The market’s forecast of a likely movement in a security’s price, often used in options pricing.
Income statement – A financial statement showing a company’s revenues, expenses, and profits over a period.
Index fund – A fund designed to track the performance of a specific market index.
Initial public offering (IPO) – The first time a company’s shares are offered to the public.
Insider buying – When company executives or directors buy shares in their own company, often viewed as a positive signal.
Insider selling – When company executives or directors sell shares, which may signal potential issues in the company.
Institutional investor – Large organizations such as pension funds or insurance companies that invest large amounts of money.
Interest rate parity – A theory that suggests the difference in interest rates between two countries will equal the difference between forward and spot exchange rates.
Intrinsic value – The true or real value of an asset, based on its fundamentals, rather than its current market price.
Inverse ETF – An ETF that aims to provide the opposite performance of a specific index.
Investment-grade bond – A bond with a high credit rating, considered less risky.
Junk bond – A high-yield bond with a low credit rating, offering higher returns but greater risk.
Keltner Channel – A volatility-based indicator similar to Bollinger Bands, using an exponential moving average.
Kicker pattern – A sharp reversal candlestick pattern signaling a strong change in market direction.
Kiting – An illegal practice involving the artificial inflation of a bank account balance.
Lagging indicator – An economic indicator that follows an event or trend, used to confirm long-term trends.
Last trading day – The final day a futures contract or option can be traded.
Lead indicator – An economic indicator that predicts future economic movements.
Leverage ratio – The ratio of a company’s debt to its equity, measuring financial leverage.
Leveraged ETF – An exchange-traded fund that uses financial derivatives to amplify the returns of an index.
Limit down – A rule in futures trading that stops trading when the price drops by a predetermined amount in a day.
Limit up – A rule in futures trading that stops trading when the price rises by a predetermined amount in a day.
Limit order – An order to buy or sell a security at a specified price or better.
Line chart – A chart that connects data points with a continuous line, typically used to show price movement over time.
Liquid asset – An asset that can be quickly converted into cash without significantly affecting its price.
Liquidity provider – A firm or institution that supplies buy and sell quotes for financial instruments.
Lock-up period – A time period after an IPO during which company insiders are restricted from selling shares.
London Interbank Offered Rate (LIBOR) – The interest rate at which major global banks lend to one another.
Long hedge – A strategy used to protect against a possible rise in prices by taking a long position in a futures contract.
Long straddle – An options strategy involving the purchase of both a call and put with the same strike price and expiration.
Loonie – A slang term for the Canadian dollar (CAD).
Lot size – The standardized quantity of an asset to be traded in a single transaction.
Margin account – A brokerage account that allows investors to borrow money to trade.
Margin requirement – The minimum amount of collateral an investor must deposit to open and maintain a leveraged position.
Market breadth – A measure of how many stocks are participating in a market trend.
Market correction – A temporary decline in stock prices, typically considered healthy for long-term growth.
Market depth – The ability of a market to absorb large buy or sell orders without significant price movements.
Market inefficiency – A situation in which an asset’s price does not accurately reflect all available information.
Market neutral – An investment strategy aiming to profit from both rising and falling markets.
Market on close (MOC) – An order to buy or sell a security as close as possible to the market’s closing price.
Market order – An order to buy or sell immediately at the best available price.
Market risk – The risk of losses due to movements in market prices.
Master limited partnership (MLP) – A business structure that combines the tax benefits of a partnership with the liquidity of publicly traded stocks.
Mean reversion – The theory that asset prices will return to their historical average over time.
Meme stock – A stock that gains popularity and value due to viral internet attention rather than company fundamentals.
Merger arbitrage – A strategy involving the purchase of a target company’s stock and short-selling the acquiring company’s stock in a merger.
Micro cap – A company with a market capitalization of less than $300 million.
Mid cap – A company with a market capitalization between $2 billion and $10 billion.
Momentum trading – A strategy focused on buying securities that are trending upwards and selling those trending downwards.
Money flow index (MFI) – A volume-weighted momentum indicator used to identify buying and selling pressure.
Money market – A segment of the financial market where short-term borrowing, lending, and trading occur.
Monte Carlo simulation – A statistical technique used to model the probability of different outcomes in financial forecasting.
Moving average convergence divergence (MACD) – A trend-following momentum indicator showing the relationship between two moving averages.
Municipal bond – A debt security issued by a state or local government to fund public projects.
Mutual fund – A professionally managed investment fund pooling money from many investors to buy securities.
Naked call – A call option sold without owning the underlying asset, exposing the seller to unlimited risk.
Naked put – A put option sold without a short position in the underlying asset, exposing the seller to substantial risk.
National Association of Securities Dealers Automated Quotations (NASDAQ) – A global electronic marketplace for buying and selling securities.
Net asset value (NAV) – The value of a fund’s assets minus its liabilities, usually expressed per share.
Net interest margin (NIM) – A measure of a bank’s profitability, calculated as the difference between interest earned and interest paid.
Net present value (NPV) – The difference between the present value of cash inflows and the present value of cash outflows over a period.
No-load fund – A mutual fund that does not charge a commission or sales fee.
Noise – Market fluctuations that do not correspond to significant financial changes or trends.
Nominal interest rate – The stated interest rate on a loan or investment, not adjusted for inflation.
Non-farm payroll (NFP) – A key economic indicator representing the number of jobs added in the U.S., excluding farming, government, and private household jobs.
Non-performing loan (NPL) – A loan in which the borrower has failed to make scheduled payments.
Off-balance-sheet – Assets or liabilities not recorded on a company’s balance sheet.
Offshore banking – Banking conducted in a foreign country to benefit from favorable regulations.
On-balance volume (OBV) – A momentum indicator that relates volume to price movements.
Open interest – The total number of open contracts in a futures or options market.
Open outcry – A method of trading where traders shout and use hand signals to communicate buy and sell orders.
Opening price – The price at which a security first trades upon the opening of an exchange.
Option chain – A listing of all available option contracts for a particular security, organized by expiration date and strike price.
Option premium – The price paid by the buyer of an option to the seller for the rights granted by the option.
Order book – A list of buy and sell orders organized by price level for a particular security.
Oscillator – A technical indicator that fluctuates within a range, often used to identify overbought or oversold conditions.
Out of the money (OTM) – A situation where an option has no intrinsic value, meaning the underlying asset’s price is not favorable to the option holder.
Over-the-counter (OTC) – Securities traded directly between two parties, without going through an exchange.
Overbought – A market condition where prices have risen too high and may be due for a correction.
Overleveraged – When a company or individual has taken on too much debt relative to their equity.
Overnight position – A trading position that remains open until the next trading day.
Oversold – A market condition where prices have fallen too much and may be due for a rebound.
Parabolic SAR – A trend-following indicator that uses dots to track price direction and identify potential reversals.
Payout ratio – The percentage of earnings paid out as dividends to shareholders.
Penny stock – Low-priced, small-cap stocks, typically trading below $5 per share.
Pegged currency – A currency that is fixed or stabilized relative to another currency or basket of currencies.
Perpetual bond – A bond with no maturity date, paying interest indefinitely.
Phantom stock – A type of employee compensation tied to company stock performance but not actual stock ownership.
Pivot point – A technical analysis indicator used to determine potential support and resistance levels.
Point and figure chart – A chart type that focuses on price movement while ignoring time intervals.
Position sizing – The process of determining how many units of an asset to trade based on risk tolerance.
Preferred stock – A class of ownership in a corporation with priority over common stock in dividend payments.
Premium – The cost of an option or the amount an asset trades above its intrinsic value.
Price ceiling – A set price above which a financial instrument cannot rise, often established by regulators.
Price floor – A set price below which a financial instrument cannot fall, often established by regulators.
Price gap – A sudden price jump or drop, leaving a “gap” on a price chart where no trading occurred.
Price pattern – A recognizable formation of price movements used to predict future price direction.
Price spread – The difference between the highest and lowest prices in a given trading session.
Price target – An analyst’s projection of the future price level of a security.
Primary market – The market where new securities are issued and sold to investors.
Prime rate – The interest rate that banks charge their most creditworthy customers.
Private placement – The sale of securities to a small group of select investors rather than the general public.
Profit-taking – The act of selling an asset to lock in gains from an increase in its price.
Program trading – Automated trading using algorithms to buy or sell large quantities of securities.
Promissory note – A written agreement to pay a specified sum of money at a future date.
Proprietary trading – When a financial firm invests for direct market gain rather than earning commissions from trading on behalf of clients.
Protectionism – Government policies that restrict international trade to protect domestic industries.
Proxy statement – A document containing information about a company’s shareholders’ meeting and voting agenda.
Public float – The number of shares of a company available for public trading.
Pump and dump – A scheme where the price of a stock is artificially inflated through false statements, only to be sold off once the price rises.
Put option – A financial contract giving the holder the right, but not the obligation, to sell an asset at a specified price.
Quantitative analysis – The use of mathematical and statistical models to assess an investment’s value or risk.
Quantitative trading – Trading strategies based on mathematical computations and number crunching.
Quiet period – A time period during which a company cannot make public statements about its earnings, typically before an IPO.
Quote – The latest price at which a security is bought or sold.
Random walk theory – The theory that stock price movements are random and cannot be predicted.
Rally – A period of sustained increases in the prices of stocks, bonds, or indexes.
Rate hike – An increase in interest rates, typically by a central bank.
Ratings downgrade – When a credit rating agency lowers the rating of a company or government’s debt.
Real estate investment trust (REIT) – A company that owns, operates, or finances income-producing real estate.
Real interest rate – The nominal interest rate minus the inflation rate.
Rebalance – The process of realigning the weightings of a portfolio’s assets.
Redemption – The repayment of a bond or preferred stock at its maturity date.
Reflation – Government policies aimed at expanding economic output and curbing deflation.
Regression analysis – A statistical method used to estimate the relationships between variables.
Relative strength index (RSI) – A momentum oscillator measuring the speed and change of price movements.
Replacement cost – The cost to replace an asset with a similar one at current market prices.
Repo (repurchase agreement) – A short-term loan where securities are sold with an agreement to repurchase them at a later date.
Resistance level – A price level where an asset faces selling pressure, preventing it from rising further.
Return on assets (ROA) – A measure of how efficiently a company uses its assets to generate profit.
Return on equity (ROE) – A measure of financial performance calculated by dividing net income by shareholder equity.
Reverse split – A reduction in the number of shares outstanding, increasing the stock’s price per share.
Risk-adjusted return – A measure of how much risk is involved in producing a return on an investment.
Risk-free rate – The theoretical return on an investment with no risk of financial loss, often represented by government bonds.
Rollover rate – The interest or fees incurred for holding a position overnight.
Round lot – A standardized number of shares, usually 100, that are traded in a single transaction.
RSI divergence – When the RSI indicator moves in the opposite direction of the price trend, potentially signaling a reversal.
Safe haven – An investment expected to retain or increase in value during market turbulence.
Sales per share – A company’s total revenue divided by the number of outstanding shares.
Scalping – A trading strategy involving quick, small profits from short-term price movements.
Secondary market – The market where investors buy and sell previously issued securities.
Sector rotation – An investment strategy where capital is shifted between sectors based on expected performance.
Securities and Exchange Commission (SEC) – The U.S. regulatory agency responsible for overseeing securities markets.
Security – A tradable financial asset, such as stocks, bonds, or options.
Sell limit order – An order to sell a security at a specified price or better.
Sell stop order – An order to sell a security once its price drops to a specified level.
Sentiment indicator – A tool that gauges market participants’ emotions and opinions about future price movements.
Sharpe ratio – A measure of risk-adjusted performance, calculated by dividing excess return by portfolio volatility.
Short covering – Buying back borrowed securities to close an open short position.
Short squeeze – A rapid price increase, forcing short sellers to buy back shares to cover their positions.
Short-term debt – Debt that must be repaid within a year.
Simple moving average (SMA) – The average price of a security over a set period, calculated by dividing the sum of prices by the number of periods.
Slippage – The difference between the expected price of a trade and the actual price at which it is executed.
Smart money – Capital controlled by institutional investors or experienced market players.
Speculative stock – A stock with a high degree of risk, often from new or emerging industries.
Spread betting – A type of speculative investing where traders bet on the direction of a financial market.
Stag – A short-term trader who aims to profit from price fluctuations in new stock issues.
Standard deviation – A measure of the amount of variation in a set of values, used to assess volatility.
Stock buyback – When a company repurchases its own shares from the marketplace, reducing the number of outstanding shares.
Stock certificate – A physical document representing ownership of a stock.
Stock exchange – A marketplace where securities are bought and sold.
Stock split – An increase in the number of a company’s shares, reducing the price per share but keeping market capitalization the same.
Stock symbol – A unique identifier for a publicly traded company’s shares.
Stop limit order – An order that becomes a limit order once a specific stop price is reached.
Stop loss order – An order to sell a security once its price falls to a specified level, limiting losses.
Strike price – The set price at which an option can be exercised.
Structured product – A pre-packaged financial instrument based on derivatives, designed to meet specific investment needs.
Support level – A price level where an asset finds buying pressure, preventing it from falling further.
Swap rate – The interest rate differential between two currencies in a foreign exchange swap.
Systematic risk – The risk inherent to the entire market, affecting all securities.
Takeover – When one company makes a bid to acquire another company.
Tax-loss harvesting – The practice of selling securities at a loss to offset capital gains tax liability.
Technical analysis – The study of past price movements to predict future price movements.
Tender offer – A public bid to buy some or all of shareholders’ shares in a corporation.
Tick – The minimum price movement of a trading instrument.
Time decay – The reduction in the value of an options contract as it approaches expiration.
Time value – The part of an option’s price that accounts for the time remaining until expiration.
Trailing stop – A stop order that moves with the market price, locking in profits while limiting potential losses.

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